Acceptance-An offeree’s consent to enter into a contract and be bound by the terms of the offer.

Accrued Interest -Interest which has been incurred but not paid.

Additional Principal Payment-A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.

Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Subject to certain limitations, the rate and payments on an ARM loan rise and fall with the market.

Adjustment Interval or Adjustment Period - The length of time between rate adjustments on an Adjustable Rate Mortgage (ARM).

Adjustment Basis- The original cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.

Affordability Analysis-A detailed analysis of your ability to afford the purchase of a home. An affordability analysis takes into consideration your income, liabilities, and available funds, along with the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that you might expect to pay.

Agreement of Sale -Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Amenity- A feature of real property that enhances its attractiveness and increases the occupant’s or user’s satisfaction although the feature is not essential to the property’s use. Natural amenities include a pleasant or desirable location near water, scenic views of the surrounding area, etc. Human-made amenities include swimming pools, tennis courts, community buildings, and other recreational facilities.

Amortization - The process of paying off a mortgage in regular increments.

Amortization Schedule - A monthly repayment schedule outlining how a loan will be paid off in fixed payments combining principal and interest.

Annual Percentage Rate (APR) - A calculation that expresses the total cost of a mortgage loan as a yearly rate (according to a federally mandated procedure). The APR calculation takes into account monthly interest payments, mortgage insurance, points, and certain fees paid at origination.

Application - An initial statement of personal and financial information required to approve a loan provided by the
borrower and necessary to initiate the approval process for a loan.

Application Fee - Fee charged by lender to cover the initial costs of processing a loan application.

Appraisal - A written estimate of a property's current market value, based on recent sales information for similar
properties, the condition of the property, and the neighborhood's impact on future property value.

Appraisal Fee -A fee charged by a licensed, certified appraiser to provide an appraisal.

Appreciation- An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.

APR - See Annual Percentage Rate.

ARM - See Adjustable Rate Mortgage.

Assessment -A local tax levied against a property for a specific purpose, such as road or sidewalk construction or sewer or street light installation.

Asset- Anything of monetary value that is owned by a person. Assets include real property, personal property, and
enforceable claims against others (including bank accounts, stocks, mutual funds, and so on).

Asset Documentation - Documents that verify the existence of the borrower’s assets.

Assumability -A loan feature that allows the loan to be transferred from the seller to the purchaser of a home with the same terms and conditions, subject to lender approval.

Assumption Clause- A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller. The loan does not need to be paid in full by the original borrower upon sale or transfer of the property.

Assumption Fee- The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.

Attorney –in-Fact- One who holds a power of attorney from another to execute documents on behalf of the grantor of the power.

B

Balloon Mortgage -A short-term, fixed-rate loan with low payments for a set number of years and a large balloon
payment of the remainder of the principal and interest due at the end of the term. A mortgage that has level monthlypayments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term. The principal and interest on the loan are amortized over a longer period than the actual term of the mortgage.

Balloon Payment- The final lump sum payment that is made at the maturity date of a balloon mortgage.

Bankruptcy - Proclamation by a court of an individual's (or organization's) state of insolvency, or inability to pay debts. A proceeding in a federal court in which a debtor who owes more than his or her assets can relieve the debts by transferring his or her assets to a trustee.

Blanket Mortgage- The mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.

Bearer - The legal owner of a piece of property.

Beneficiary- The person designated to receive the income from a trust, estate, or a deed of trust.

Bequeath- To transfer personal property through a will.

Bi-weekly Mortgage -A payment plan under which the borrower pays one half of a monthly payment every two weeks. A mortgage that requires payments to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment that would be required if the loan were a standard 30-year fixed-rate mortgage, and they are usually drafted from the borrower's bank account. The result for the borrower is a substantial savings in interest.

Bridge Loan- A form of second trust that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as"swing loan."

Bona Fide - In good faith.

Bond- An interest-bearing certificate of debt with a maturity date. An obligation of a government or business corporation. A real estate bond is a written obligation usually secured by a mortgage or a deed of trust.

Borrower (or Mortgagor) -An individual who applies for and receives a loan in the form of a mortgage with the intention of repaying the loan in full.

Budget Category- A category of income or expense data that you can use in a budget. You can also define your own budget categories and add them to some or all of the budgets you create. "Rent" is an example of an expense category."Salary" is a typical income category.

Buy-Down - A situation in which the seller contributes money, allowing the lender to give the buyer a lower rate nd
payment, usually in exchange for an increase in sales price.

Buy-Down Account-An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest rate buy down plan is in effect.

Buy Down Mortgage- A temporary buy down is a mortgage on which an initial lump sum payment is made by any party to reduce a borrower's monthly payments during the first few years of a mortgage. A permanent buy down reduces the interest rate over the entire life of a mortgage.

Buyer's Market - Market conditions that favor buyers. With more sellers than buyers in the market, buyers have ample choice of properties and may be able to negotiate lower prices.

C

Caps - Limits on changes in ARM interest rates or monthly payments, either in an adjustment period or over the life of the loan.

Caps (Interest) - Consumer safeguards which limit the amount the interest rate on an adjustable rate mortgage can change in an adjustment interval and/or over the life of the loan.

Caps (Payment) - Consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change. Since they do not limit the amount of interest the lender is earning, payment caps may cause negative amortization.

Cash Out - A refinance for more than the balance of the current mortgage. The excess money taken out reduces the borrower's equity.

Cashier's Check (or Bank Check) - A check whose payment is guaranteed because it was paid for in advance and is drawn on the bank's account instead of the customer's.

CC&Rs -See Covenants, Conditions and Restrictions.

Ceiling (Life Cap) - The maximum allowable interest rate of an adjustable rate mortgage over the life of the loan.

Chain of Title - The chronological order of conveyance of a property from the original owner to the present owner.

Clear Title - A marketable title, free of clouds and disputes.

Closing (or Settlement) - Meeting between the buyer, seller, and lender or their agents, at which property and funds legally change hands.

Closing Agent - Neutral third party appointed to act as a custodian for documents and funds during the transfer of property from seller to buyer. Depending on local law and custom, this could be an attorney, escrow agent, or title company.

Closing Cost Item- A fee or amount that a home buyer must pay at closing for a single service, tax, or product. Closing costs are made up of individual closing cost items such as origination fees and attorney's fees. Many closing cost items are included as numbered items on the HUD-1 statement.

Closing Costs - Costs associated with the closing of the loan (e.g. title costs, loan fees, discount fees, inspection fees, appraisals, etc.). Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders or Realtors® often provide estimates of closing costs to prospective homebuyers.

Closing/Settlement Statement - A form prepared by the closing agent that itemizes the closing costs associated with purchasing or refinancing a home. Also see HUD-1.

Cloud on Title -An outstanding claim or encumbrance that, if valid, would affect or impair the owner's title. Any conditions revealed by a title search that adversely affect the title to real estate. Usually clouds on title cannot be removed except by a quitclaim deed, release, or court action.

Combined Loan - To-Value (CLTV) -The percentage of the property value borrowed through a combination of more than one loan (for example, first mortgage and home equity line of credit). Mathematically, the combined loan and line of credit amounts divided by property value equals Combined Loan-To-Value Ratio.

COFI - See Cost of Funds Index.

Coinsurance- A sharing of insurance risk between the insurer and the insured. Coinsurance depends on the relationship between the amount of the policy and a specified percentage of the actual value of the property insured at the time of the loss.

Coinsurance Clause- A provision in a hazard insurance policy that states the amount of coverage that must be maintained -- as a percentage of the total value of the property -- for the insured to collect the full amount of a loss.

Collateral -Assets that secure a loan. (In the case of a mortgage, real property serves as collateral.) An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Co-Maker- A person who signs a promissory note along with the borrower. A Co-maker's signature guarantees that the loan will be repaid, because the borrower and the CO-maker are equally responsible for the repayment. See endorser.

Commission - Money paid to a real estate agent or broker in a sales transaction.

Commitment - A formal offer by a lender to a borrower to make a loan under certain terms or conditions. Common Areas Assessments-Levies against individual unit owners in a condominium or planned unit development (PUD) project for additional capital to defray homeowners' association costs and expenses and to repair, replace, maintain, improve, or operate the common areas of the project.

Common Areas- Those portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project's homeowners' association (or a cooperative project's cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Common Law- An unwritten body of law based on general custom in England and used to an extent in the United States.

Community Land Trust Mortgage Option- An alternative financing option that enables low-and moderate-income home buyers to purchase housing that has been improved by a nonprofit Community Land Trust and to lease the land on which the property stands.

Community Property- In some western and southwestern states, a form of ownership under which property acquired during a marriage is presumed to be owned jointly unless acquired as separate property of either spouse.

Community Seconds-An alternative financing option for low- and moderate-income households under which an investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit organization. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate at all). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.

Comparable- An abbreviation for "comparable properties"; used for comparative purposes in the appraisal process. Comparables are properties like the property under consideration; they have reasonably the same size, location, and amenities and have recently been sold. Comparables help the appraiser determine the approximate fair market value of the subject property.

Condemnation- The determination that a building is not fit for use or is dangerous and must be destroyed; the taking of private property for a public purpose through an exercise of the right of eminent domain.

Condominium -A form of property ownership in which the homeowner holds title to an individual dwelling unit and an interest in common areas and facilities of a multi-unit project.

Condominium Conversion- Changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Condominium Hotel-A condominium project that has rental or registration desks, short-term occupancy, food and telephone services, and daily cleaning services and that is operated as a commercial hotel even though the units are individually owned.

Conforming Loan -A mortgage loan eligible for purchase by the two federally sponsored housing agencies, Fannie Mae and Freddie Mac.

Contingency - A condition which must be satisfied before a contract is legally binding--before a sale can close. A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Cooperative- A type of multiple ownership in which the residents of a multiunit housing complex own shares in the cooperative corporation that owns the property, giving each resident the right to occupy a specific apartment or unit.

Cooperative Mortgages- Mortgages related to a cooperative project. This usually refers to the multifamily mortgage covering the entire project but occasionally describes the share loans on the individual units.

Cooperative Project- A residential or mixed-use building wherein a corporation or trust holds title to the property and sells shares of stock representing the value of a single apartment unit to individuals who, in turn, receive a proprietary lease as evidence of title.

Contract Of Sale - The agreement between the buyer and seller on the purchase price, terms, and conditions of a sale.

Conventional Loan - A mortgage not insured by the FHA or guaranteed by the VA.

Conventional Mortgage- A mortgage that is not insured or guaranteed by the federal government.

Convertibility Clause-A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to change the ARM to a fixed-rate mortgage at specified timeframes after loan origination.

Convertible ARMs - ARMs with the option of conversion to a fixed rate loan during a given time period. An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.

Conveyance - The transfer of a deed, lease, or mortgage.

Corporate Relocation-Arrangements under which an employer moves an employee to another area as part of the employer's normal course of business or under which it transfers a substantial part or all of its operations and employees to another area because it is relocating its headquarters or expanding its office capacity.

Cost of Funds Index (COFI) - A common index used in adjustable rate loans based on the weighted-average interest rate paid for deposits by savings institutions that are members of the 11th Federal Home Loan Bank District.

Covenants, Conditions, and Restrictions (CC&Rs) -A document that defines the use, requirements and restrictions of a condominium or Planned Unit Development (PUD).

Credit- An agreement in which a borrower receives something of value in exchange for a promise to repay the lender at a later date.

Credit History- A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report - A report detailing the credit history of a prospective borrower, used by lenders to help determine creditworthiness.

Credit Reporting Agency- An organization that prepares reports that are used by lenders to determine a potential borrower's credit history. The agency obtains data for these reports from a credit repository as well as from other sources.

Credit Repository-An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.

D

Debt-To-Income Ratio -A figure, expressed as a ratio, that compares the amount of recurring debt payments a borrower is obligated to make to the amount of their income.

Deed - Legal document by which title to a property is transferred from one owner to another. The deed contains a description of the property and is signed, witnessed, and delivered to the buyer at closing.

Deed Of Trust - Document creating a lien on a property as security for the payment of a debt. In some states, a mortgage is used instead.

Default - Failure to meet legal obligations in a contract, including failure to make payments on a loan. A mortgage is generally considered to be in default when a payment is 30 days past due.

Delinquency -Failure to make required payments on time. Failure to make mortgage payments when mortgage payments are due.

Deposit -Cash paid to the seller when a formal sales contract is signed. A sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.

Depreciation - Decline in property value.

Document Review - A process by which the lender reviews documents necessary to fund a loan.

Down Payment -In a home purchase, the difference between the purchase price and the mortgage amount. The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Due-On-Sale Provision- A provision in a mortgage that allows the lender to demand repayment in full if the borrower sells the property that serves as security for the mortgage.

Due-On Transfer Provision- This terminology is usually used for second mortgages. See due-on-sale provision.

E

Earnest Money - Deposit made by a buyer toward the down payment as evidence of good faith when the purchase agreement is signed.

ECOA - See Equal Credit Opportunity Act. A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs

Effective Age- An appraiser's estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.

Effective Gross Income- Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Eminent Domain- The right of a government to take private property for public use upon payment of its fair market value. Eminent domain is the basis for condemnation proceedings.

Encumbrance - A legal right or interest in a property that affects title and may lessen the property value. Anything that affects or limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions.

Employer Assisted Housing- A special housing initiative that offers several different ways for employers to work with local lenders to develop plans to assist their employees in purchasing homes.

Encroachment- An improvement that intrudes illegally on another’s property.

Endorser- A person who signs ownership interest over to another party. Contrast with CO-maker

Equal Credit Opportunity Act (ECOA) - Federal law requiring creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity - The difference between the current market value of a property and the outstanding mortgage balance. A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.

Equity Loan - A loan based on the borrower's equity in his or her home.

Escrow -Neutral third party appointed to act as a custodian for documents and funds during the transfer of property from seller to buyer or in the course of refinancing property. An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow Account - Account held by lender containing funds collected in conjunction with monthly mortgage payments. Also known as impounds, the funds in this account are held in trust by the lender on behalf of the borrower, and are used to pay expenses such as property taxes and homeowner's insurance.

Escrow Analysis- The periodic examination of escrow accounts to determine if current monthly deposits will provide sufficient funds to pay taxes, insurance, and other bills when due.

Escrow Payment- The portion of a mortgagor's monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.

Escrow Officer - See Closing Agent.

Estimated Settlement (or Closing) Statement - A document provided by the closing agent, prior to loan closing, estimating all costs and indicating the final sum the buyer will be required to bring to the closing.

Expense-To-Income Ratio -Also known as Back-End Ratio and Debt-to-Income Ratio. The figure derived by dividing all borrower's monthly financial obligations by his/her gross monthly income.

Executor- A person named in a will to administer an estate. The court will appoint an administrator if no executor is named. "Executrix" is the feminine form.

F

Fair Credit Report Act- A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.

Fair Market Value- The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae (FNMA) - Corporation created by Congress that buys and sells residential mortgages. Fannie Mae provides funds for one in seven mortgages.

Fannie 97- A financing option for a fixed-rate mortgage that offers home buyers a 3 percent down payment loan with a term between 15 and 30 years. The mortgage features a loan-to-value (LTV) percentage of 97 percent, and is designed to expand homeownership opportunities for people with modest incomes. Borrowers must take a pre-purchase home buyer education session to qualify for a Fannie 97 mortgage.

Fannie Mae Community Home Buyer Program- An income-based community lending model, under which mortgage insurers and Fannie Mae offer flexible underwriting guidelines to increase a low- or moderate-income family's buying power and to decrease the total amount of cash needed to purchase a home. Borrowers who participate in this model are required to attend pre-purchase home-buyer education sessions.

Fannie Mae Properties-Fannie Mae owns, manages, and has available for sale, single-family detached homes, two- to four-unit properties, condominiums, and townhouses in a variety of neighborhoods. The number, type, and sales price may vary substantially. The homes vary in age and may require repairs. Fannie Mae homes are sold through local real estate brokers whose contact information is provided in the Fannie Mae Properties for Sale search results on homepath.com.

Farmer's Home Administration(FmHA) -An agency of the U.S. Department of Agriculture that provides financing for purchasers of homes and farms in small towns and rural areas.

Federal Housing Administration (FHA) -Government agency, division of the Department of Housing and Urban Development, which insures residential mortgage loans made by private lenders and sets standards for underwriting mortgage loans.

Federal National Mortgage Association (FNMA) - See Fannie Mae.

Federal Reserve - Central bank of the United States and major regulatory agency for many commercial banks.

Fee Simple -Absolute ownership of real property. The greatest possible interest a person can have in real estate.

Fee Simple Estate- An unconditional, unlimited estate of inheritance that represents the greatest estate and most extensive interest in land that can be enjoyed. It is of perpetual duration. When the real estate is in a condominium project, the unit owner is the exclusive owner only of the air space within his or her portion of the building (the unit) and is an owner in common with respect to the land and other common portions of the property.

FHA - See Federal Housing Administration. An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

FHA Loan -Mortgage loan insured by the FHA for low to middle income borrowers, open to all qualified home purchasers.

FHA Censored Mortgage-A mortgage (under FHA Section 244) for which the Federal Housing Administration (FHA) and the originating lender share the risk of loss in the event of the mortgagor's default.

FICO Score - A credit evaluation score developed by Fair, Isaac, and Co., used by lenders as one factor in making a loan decision. Some methods of improving a score are to establish and maintain a payment history on credit accounts, keep public records (bankruptcies, judgments, etc.) and collection accounts to a minimum, pay down loans, keep credit cards well below their limits, avoid late payments, and limit applying for new credit.

First Mortgage - The primary lien against a property.

Fixed Rate - An interest rate that does not change during the term of the loan.

Fixed-Rate Mortgage - A mortgage whose interest rate does not change for the life of the loan. Payments are also fixed.

Fixture-Personal property that becomes real property when attached in a permanent manner to real estate.

Federal Home Loan Mortgage Corporation (FHLMC) - See Freddie Mac.

Flood Insurance -A form of hazard insurance that covers improved property damage or loss due to flood.

Floor - The minimum interest rate payable on an Adjustable Rate Mortgage.

Foreclosure- The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Freddie Mac (FHLMC) - Quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Fully Amortized ARM- An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.

G

Ginnie Mae - See Government National Mortgage Association.

GNMA - See Government National Mortgage Association. A government-owned corporation within the US Department of Housing and Urban Development (HUD). Created by Congress on September 1, 1968, GNMA assumed responsibility for the special assistance loan program formerly administered by Fannie Mae. Popularly known as Ginnie Mae.

Government Mortgage- A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortgage.

Government National Mortgage Association (GNMA, or Ginnie Mae) - Government agency that provides funds for VA and FHA loans.

Good Faith Estimate -Written estimate of costs the borrower will pay at closing, provided by a lender within three business days of loan application.

Grace Period - Period of time during which a loan payment may be made after its due date without incurring a late penalty.

Graduated Payment Mortgage (GPM) - Mortgage in which initial low payments (with potential negative amortization) increase regularly for several years and then level off.

Group Home- A single-family residential structure designed or adapted for occupancy by unrelated developmentally disabled persons. The structure provides long-term housing and support services that are residential in nature.

Gross Income -Borrower’s total income before taxes or expenses are deducted.

Gross Monthly Income - Total monthly income before taxes or expenses are deducted. Used in the loan origination process to calculate borrower's ability to make payments on a loan.

Growing Equity Mortgage-A fixed-rate mortgage that provides scheduled payment increases over an established period of time, with the increased amount of the monthly payment applied directly toward reducing the remaining balance of the mortgage

Guarantee or Guaranty - A promise by one party to pay a debt or perform an obligation contracted by another in the event of that person's default.

H

Hazard Insurance - A policy that protects the insured against loss due to fire or certain natural disasters in exchange for a premium paid to the insurer. Also known as Homeowner Insurance or fire insurance.

Home Equity Line Of Credit - A revolving line of credit secured by the equity in the home. Unlike a Home Equity Loan, these funds may be drawn and repaid like a credit card.

Home Equity Loan -An additional mortgage secured by the equity in the home. All funds for this loan are disbursed at closing. (In contrast, see Home Equity Line Of Credit).

Home Equity Conversion Mortgage- HECM-A special type of mortgage that enables older home owners to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Unlike traditional home equity loans, a borrower does not qualify on the basis of income but on the value of his or her home. In addition, the loan does not have to be repaid until the borrower no longer occupies the property. Sometimes called a reverse mortgage.

Home Inspection-A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.

Homeowner's Warranty - A type of insurance that covers repairs to specified parts of a house for a specific period of time. A type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.

Housing and Urban Development (HUD) - A U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.

Housing Code - Local government ordinance that sets minimum standards of safety and sanitation for existing residential buildings.

Housing Expense-To-Income Ratio -The ratio, expressed as a percentage, that results when dividing a borrower's housing expenses by his/her gross monthly income.

HUD - See Housing and Urban Development.

HUD-1 Settlement Statement - A form mandated by the federal government that itemizes the closing costs associated with purchasing a home. Also see Estimated Settlement Statement. A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."

HUD Median Income- Median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

I

Impound (or Reserves) - Portion of a borrower's monthly payments held by the lender to pay for taxes, insurance, and other items as they become due.

Impound Account - See Escrow Account.

Index - A published rate used by lenders to calculate interest adjustments on adjustable rate mortgages (Index + Margin = Interest Rate). Common indexes include 1-Year Treasury securities, COFI (Cost Of Funds Index), and Six-Month LIBOR (London Interbank Offered Rate).

In-File- credit Report- An objective account, normally computer-generated, of credit and legal information obtained from a credit repository.

Inflation- An increase in the amount of money or credit available in relation to the amount of goods or services available, which causes an increase in the general price level of goods and services. Over time, inflation reduces the purchasing power of a dollar, making it worth less.

Initial Rate - The interest rate charged during the first interval of an adjustable rate mortgage. The original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes known as "start rate" or "teaser."

Insolvency - Condition of a person unable to pay debts as they fall due.

Insurance - A contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy, and the periodic payment is known as an insurance premium.

Insurance Binder- A document that states that insurance is temporarily in effect. Because the coverage will expire by a specified date, a permanent policy must be obtained before the expiration date.

IRA- A retirement account that allows individuals to make tax-deferred contributions to a personal retirement fund. Individuals can place IRA funds in bank accounts or in other forms of investment such as stocks, bonds, or mutual funds.

Instanced Mortgage- A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest - Charge paid for borrowing money.

Interest Accrual Rate- The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments, although it is not used for an adjustable-rate mortgage (ARM) with payment change limitations

Interest Rate - The rate, expressed as a percentage, of the outstanding balance used to calculate interest charges.

Interest Rate Buy down Plan- An arrangement wherein the property seller (or any other party) deposits money to an account so that it can be released each month to reduce the mortgagor's monthly payments during the early years of a mortgage. During the specified period, the mortgagor's effective interest rate is "bought down" below the actual interest rate.

Interest Rate Cap - A safeguard built into ARMs to prevent drastic changes in interest rates.

J

Joint Liability - Liability shared among two or more people, each of whom is liable for the full debt.

Joint Tenancy - The ownership of property by two or more persons with the survivor receiving the share of the deceased.

Judgment Lien -A lien on the property of a debtor resulting from the decree of a court.

Judicial Foreclosure- A type of foreclosure proceeding used in some states that is handled as a civil lawsuit and conducted entirely under the auspices of a court.

Jumbo Loan - A mortgage with a principal balance that exceeds the amount eligible for purchase by Fannie Mae and Freddie Mac. Jumbo loans generally carry a higher interest rate.

Junior Mortgage - A mortgage subordinate or secondary to another mortgage. In the case of a foreclosure, a senior mortgage will be paid first.

L

Late Charge - Penalty paid by a borrower when a payment is made after the grace period provided by the lender.

Lease-A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Leasehold-Estate- A way of holding title to a property wherein the mortgagor does not actually own the property but rather has a recorded long-term lease on it.

Lease-Purchase Mortgage Loan- An alternative financing option that allows low- and moderate-income home buyers to lease a home from a nonprofit organization with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance (PITI) payments on the first mortgage plus an extra amount that is earmarked for deposit to a savings account in which money for a down payment will accumulate.

Lender - The bank, mortgage company, or mortgage broker offering the loan.

Liability Insurance- Insurance coverage that offers protection against claims alleging that a property owner's negligence or inappropriate action resulted in bodily injury or property damage to another party.

LIBOR, London Interbank Offered Rate - The interest rate charged among banks for short-term Eurodollar loans, and a common index for adjustable rate mortgages.

Lien - A legal claim against a property that must be paid when the property is sold. An encumbrance against property for money due, either voluntary or involuntary.

Lifetime Interest Rate Cap - The highest interest rate that can be charged for an adjustable rate mortgage during the life of the loan. For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap, interest rate ceiling and interest rate floor.

Lifetime Payment Cap- For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage. See cap.

Loan Servicing - The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans and remitting payments to investors).

Loan Application - Document required by lenders prior to loan approval containing detailed information about the borrower and property.

Loan Application Fee -Fee paid by prospective buyer to lender when applying for a mortgage.

Loan Origination Fee (or Processing Fee) - Fee charged by a lender to originate and process a loan.

Loan-To-Value (LTV) Ratio -The percentage of the property value borrowed (loan amount/property value = loan to value ratio).

Lock (or Lock-in) -A lender's guarantee of an interest rate and related points for a set period of time, usually between loan application and loan closing. Protects borrower against rate increases during that time. A written agreement guaranteeing the home buyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

Lock-in Period-The amount of time that a lender will guarantee a loan's interest rate. Once you've locked in the interest rate on a loan, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days.

LTV - See Loan-To-Value Ratio. The unpaid principal balance of the mortgage on a property divided by the property's appraised value. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.

M

Margin - The percentage amount added to an index to calculate the new interest rate of an adjustable rate mortgage at each adjustment.

Market Value - The value that a willing seller would accept and a willing buyer would offer given a reasonable time for the seller to market a property.

Master Association- A homeowners' association in a large condominium or planned unit development (PUD) project that is made up of representatives from associations covering specific areas within the project. In effect, it is a "second-level" association that handles matters affecting the entire development, while the "first-level" associations handle matters affecting their particular portions of the project.

Maximum Financing- A mortgage amount that is within 5 percent of the highest loan-to-value (LTV) percentage allowed for a specific product. Thus, maximum financing on a fixed-rate mortgage would be 90 percent or higher, because 95 percent is the maximum allowable LTV percentage for that product.

Merged Credit Report- A credit report that contains information from three credit repositories. When the report is created, the information is compared for duplicate entries. Any duplicates are combined to provide a summary of a your credit.

Money Market Account- A savings account that provides bank depositors with many of the advantages of a money market fund. Certain regulatory restrictions apply to the withdrawal of funds from a money market account.

Money Market Fund- A mutual fund that allows individuals to participate in managed investments in short-term debt securities, such as certificates of deposit and Treasury bills.

Monthly Fixed Installment- That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction.

Monthly Housing Expense - Total monthly expense of mortgage principal and interest, taxes, and insurance.

Mortgage - Document creating a lien on a property as security for the payment of a debt. In some states, a Deed of Trust is used instead.

Mortgage Banker - A lender that originates and funds, then sells and services mortgage loans.

Mortgage Broker - A person or entity that arranges financing for borrowers, but places loans with lenders rather than funding them with the broker's own money. An individual or company that brings borrowers and lenders together for the purpose of loan origination. Mortgage brokers typically require a fee or a commission for their services.

Mortgage Insurance - Insurance purchased by a borrower to cover the lender's risk of loss. Mortgage Insurance is generally required by lenders when the loan-to-value on a first mortgage is greater than 80% of the value of the property. A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration (FHA). Depending on the type of mortgage insurance, the insurance may cover a percentage of or virtually all of the mortgage loan. See private mortgage insurance.

MIP, Mortgage Insurance Premium - The monthly, or yearly, payment for mortgage insurance. The amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company.

Mortgage Life Insurance- A type of term life insurance often bought by mortgagors. The amount of coverage decreases as the principal balance declines. In the event that the borrower dies while the policy is in force, the debt is automatically satisfied by insurance proceeds.

Mortgage Loan - A loan for which real estate serves as collateral to provide for repayment in case of default.

Mortgage Note - Legal document obligating a borrower to repay a loan secured by a mortgage.

Mortgagee - The lender in a mortgage loan transaction.

Mortgagor -The borrower in a mortgage loan transaction. The mortgage borrower who gives the mortgage as a pledge to repay.

Multi-Dwelling Units- Properties that provide separate housing units for more than one family, although they secure only a single mortgage.

Multi-Family Property- Fannie Mae provides financing for multifamily (buildings with five or more units) rental properties through a nationwide network of mortgage lenders.

N

Negative Amortization -Increase in principal balance that occurs when monthly payments are not large enough to pay all interest accrued on a loan, usually caused when payment caps prevent sufficient payment increases. Deferred interest is added to the loan balance, resulting in the borrower owing more than the original amount of the loan.

Net Cash Flow- The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance (PITI) for the mortgage, homeowners' association dues, leasehold payments, and subordinate financing payments.

Net-Worth- The value of all of a person's assets, including cash, minus all liabilities.

NOD- Notice of Default-A formal written notice to a borrower that a default has occurred and that legal action may be taken.

No Cash-out Refinance- A refinance transaction in which the new mortgage amount is limited to the sum of the remaining balance of the existing first mortgage, closing costs (including prepaid items), points, the amount required to satisfy any mortgage liens that are more than one year old (if the borrower chooses to satisfy them), and other funds for the borrower's use (as long as the amount does not exceed 1 percent of the principal amount of the new mortgage).

No Doc Loan -A loan for which neither income, employment, nor assets are stated on application. Borrowers must have a perfect credit history.

Non-Liquid Asset-An asset that cannot easily be converted into cash.

No Ratio Loan - This loan program is offered for borrowers who have a strong asset base and perfect credit history; the loan application must be fully completed except for any reference to income.

Note -Legal document stating the terms of a debt and a promise to repay it. A written agreement containing a promise of the signer to pay to a named person, or order, or bearer, a definite sum of money at a specified date or on demand.

Note Rate- The interest rate stated on a mortgage note.

O

Original Principal Balance-The total amount of principal owed on a mortgage before any payments are made.

Origination Fee - See Loan Origination Fee. A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount

Owner Financing - A purchase in which the seller provides all or part of the financing. A property purchase transaction in which the property seller provides all or part of the financing.

P

Payment Cap - Limit on the amount by which a borrower's adjustable rate mortgage payments may increase, regardless of rise in interest rates. May result in negative amortization.

Payment Change Date - The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment adjustable-rate mortgage (GPARM). Generally, the payment change date occurs in the month immediately after the adjustment date.

Per Diem Interest - Interest calculated per day. Depending on the day of the month on which closing takes place, borrower pays interest from the date of closing to the end of the month. The first mortgage payment of a loan is generally due on the first of the following month.

Periodic Interest Rate Cap -A limit on the amount that interest rates can change at each adjustment period.

Periodic Payment Cap-For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease during any one adjustment period.

Periodic Rate Cap- For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.

PITI - Principal, Interest, Taxes, and Insurance, the components of a monthly mortgage payment; also called Monthly Housing Expenses.

PITI Reserves- A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months.

Points (or Discount Points) - Money paid to a lender at closing in exchange for a lower interest rate. Each point is equal to 1% of the loan amount.

Power-Of-Attorney-POA- A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-Arranged Financing Agreement- A formal or informal arrangement between a lender and a borrower wherein the lender agrees to offer special terms (such as a reduction in the costs) for a future refinancing of a mortgage being originated as an inducement for the borrower to enter into the original mortgage transaction.

Prepayment - Full or partial payment of the principal before the due date. This might occur if the borrower makes extra payments, sells the property, or refinances the existing loan. Any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner's decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty - Fee charged by a lender for early payment of debt. A charge imposed by a mortgage lender on a borrower who wants to pay off part or all of a mortgage loan in advance of schedule.


Prime Rate - Lowest commercial interest rate charged by a bank on short-term loans to its most credit-worthy customers. Often used as an index for home equity lines of credit.

Power of Attorney - Legal document authorizing one person to act on behalf of another.

Prepaid Expenses - Taxes, insurance, and assessments paid in advance of due dates.

Prepaid Interest - Interest charged to a borrower at closing to cover interest on the loan between closing and the end of the month in which the loan closes.

Prequalification - The process of estimating how much money a prospective homebuyer will be eligible to borrow prior to application for a loan.

Principal - The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI) -see Mortgage Insurance.

Property Tax - A government tax based on an assessed value of a property.

PUD, Planned Unit Development - A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of all individual PUD unit owners.
Purchase Agreement - Contract signed by buyer and seller stating the terms and conditions under which a property will be purchased. A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Q

Qualifying Ratios-The ratio of your fixed monthly expenses to your gross monthly income, used to determine how much you can afford to borrow. The fixed monthly expenses would include PITI along with other obligations such as student loans, car loans, or credit card payments.

Quit-Claim-Deed- A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.

R

Radon- A radioactive gas found in some homes that in sufficient concentrations can cause health problems.

Rate-Improvement Mortgage- A fixed-rate mortgage that includes a provision that gives the borrower a one-time option to reduce the interest rate (without refinancing) during the early years of the mortgage term.

Rate Lock (or Lock In) - A lender's guarantee of an interest rate and related points for a set period of time, usually between loan application and loan closing. Protects borrower against rate increases during that time.

Real Estate Broker -An agent who represents a buyer or seller in a real estate transaction.

Real Estate Settlement Procedures Act (RESPA) - Law requiring lenders to give borrowers advance notice of closing costs.

Real Property - Land and everything that is permanently affixed to it. Land and appurtenances, including anything of a permanent nature such as structures, trees, minerals, and the interest, benefits, and inherent rights thereof.

Realtor - Real estate professional who is a member of the National Association of Realtors.

Re-Amortize - The function to provide a new payment amount as it relates to a new loan amount or a new interest rate.

Reclamation -The right of the person with title to a property to recover it from the debtor in the event of a bankruptcy.

Reconveyance - The transfer of property back to the owner when a mortgage is fully repaid.

Rescission- The cancellation or annulment of a transaction or contract by the operation of a law or by mutual consent. Borrowers usually have the option to cancel a refinance transaction within three business days after it has closed.

Recording - The act of entering documents concerning title to a property into the public records. The noting in the
registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.

Recording Fee - Money paid to an agent for entering the sale of a property into the public records.

Reduced Doc Loan - This program eliminates the need to verify income. Income stated on the 1003 is used for
qualification. Borrowers who receive W2 income are not qualified for this type of loan. Two years of continuous self-employment income or an established or consistent 2 years' source of income is required.

Refinancing - The process of paying off one loan with the proceeds from a new loan secured by the same property. The process of paying off one loan with the proceeds from a new loan using the same property as security.

Rehabilitation Mortgage-A mortgage created to cover the costs of repairing, improving, and sometimes acquiring an
existing property.

Remaining Balance- The amount of principal that has not yet been repaid. See principal balance.

Remaining Term- The original amortization term minus the number of payments that have been applied.

Rent-Loss Insurance-Insurance that protects a landlord against loss of rent or rental value due to fire or other casualty that renders the leased premises unavailable for use and as a result of which the tenant is excused from paying rent.

Repayment Plan- An arrangement made to repay delinquent installments or advances. Lenders' formal repayment plans are called "relief provisions."

Replacement-Reserve Fund- A fund set aside for replacement of common property in a condominium, PUD, or cooperative project -- particularly that which has a short life expectancy, such as carpeting, furniture, etc.

Repossession (or Foreclosure) - Legal process by which the lender forces the sale of a property because the borrower has not met the mortgage terms.

Rescission -The cancellation of a mortgage loan, permitted by law on a refinance transaction when the property is owner occupied.

RESPA - See Real Estate Settlement Procedures Act.

Revolving Liability-A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. The borrower is billed for the amount that is actually borrowed plus any interest due.

RHS- Rural Housing Service- An agency within the Department of Agriculture, which operates principally under the Consolidated Farm and Rural Development Act of 1921 and Title V of the Housing Act of 1949. This agency provides financing to farmers and other qualified borrowers buying property in rural areas who are unable to obtain loans elsewhere. Funds are borrowed from the U.S. Treasury.

Right of First Refusal- A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others. Right of

Ingress and Egress- The right to enter or leave designated premises. Right of Survivorship-In joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

S

Sales Agreement -Contract signed by buyer and seller stating the terms and conditions under which a property will be sold.

Sales-Leaseback- A technique in which a seller deeds property to a buyer for a consideration, and the buyer
simultaneously leases the property back to the seller.

Second Mortgage - A subordinate mortgage made in addition to a first mortgage.

Secondary Mortgage Market - The market into which primary mortgage lenders sell the mortgages to obtain funds to originate more new loans. Includes investors like Fannie Mae and Freddie Mac. The buying and selling of existing mortgages.

Secured Loan- A loan that is backed by collateral

Security- The property that will be pledged as collateral for a loan.

Seller-Take-Back- An agreement in which the owner of a property provides financing, often in combination with an
assumable mortgage. See owner financing.

Servicing (or Loan Administration) - The collection of mortgage payments from borrowers and related responsibilities (such as handling escrows for property tax and insurance, foreclosing on defaulted loans, and remitting payments to investors).

Servicer- An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.

Settlement (or Closing) - Meeting between the buyer, seller, and closing agent at which property and funds legally change hands.

Settlement Cost (HUD guide) - Booklet published by the department of Housing and Urban Development (HUD) that provides an overview of the lending process, given to consumers after completing their loan applications.

Settlement Costs - See Closing Costs.

Settlement Sheet - The computation of costs payable at closing which determines the seller's net proceeds and the buyer's net payment.

Simple Interest -Interest computed only on the principal balance.

Special Deposit Account- An account that is established for rehabilitation mortgages to hold the funds needed for the rehabilitation work so they can be disbursed from time to time as particular portions of the work are completed.

Standard-Payment Calculation- The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.

Step-Rate-Mortgage- A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.

Subdivision- A housing development that is created by dividing a tract of land into individual lots for sale or lease.

Subordinate Financing- Any mortgage or other lien that has a priority that is lower than that of the first mortgage.

Subsidized Second Mortgage-An alternative financing option known as the Community Seconds® mortgage for low- and moderate-income households. An investor purchases a first mortgage that has a subsidized second mortgage behind it. The second mortgage may be issued by a state, county, or local housing agency, foundation, or nonprofit corporation. Payment on the second mortgage is often deferred and carries a very low interest rate (or no interest rate). Part of the debt may be forgiven incrementally for each year the buyer remains in the home.

Survey - A measurement of land, prepared by a licensed surveyor, showing a property's boundaries, elevations, improvements, and relationship to surrounding tracts. A print showing the measurements of the boundaries of a parcel of land, together with the location of all improvements on the land and sometimes its area and topography.

Sweat Equity - Value added to a property by improvements made by the owner. Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash.

T

Tax Impound - See Escrow Account.

Tax Lien - Claim against a property for unpaid taxes.

Tax Sale -Public sale of property by a government authority as a result of non-payment of taxes.

Tenancy by Entirety- A type of joint tenancy of property that provides right of survivorship and is available only to a husband and wife. Contrast with tenancy in common.

Tenant in Common- A type of joint tenancy in a property without right of survivorship. Contrast with tenancy by the entirety and with joint tenancy.

Tenant-Stockholder- The obligee for a cooperative share loan, who is both a stockholder in a cooperative corporation and a tenant of the unit under a proprietary lease or occupancy agreement.

Term - The number of years it will take to pay off a loan.

Third-Party-Origination- A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market. See mortgage broker.

Title -Document which gives evidence of ownership of a property and the rights of ownership and possession of that property. A legal document evidencing a person's right to or ownership of a property.

Title Company - A company that insures title to property. A company that specializes in examining and insuring titles to real estate.

Title Insurance - Insurance which protects the lender (lender's policy) or the buyer (owner's policy) against loss due to disputes over ownership of a property. Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.

Title Search - Examination of municipal records to ensure that the seller is the legal owner of a property and that no liens or other claims exist against the property. A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Total Expense Ratio- Total obligations as a percentage of gross monthly income. The total expense ratio includes monthly housing expenses plus other monthly debts.

Trade Equity- Equity that results from a property purchaser giving his or her existing property (or an asset other than real estate) as trade as all or part of the down payment for the property that is being purchased. Transfer

Tax -Tax paid when title passes from one owner to another. Not applicable in all jurisdictions. State or local tax payable when title passes from one owner to another.

Transfer of Ownership- Any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property "subject to" the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device. In cases in which an intervivos revocable trust is the borrower, lenders also consider any transfer of a beneficial interest in the trust to be a transfer of ownership.

Treasury Index- An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or is derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. See adjustable-rate mortgage (ARM).

Trust Account -Account maintained by a broker or escrow company to handle all money collected for clients.

Trustee - Someone given legal responsibility to hold property in the best interest of another. A fiduciary who holds or controls property for the benefit of another.

Truth-In-Lending Act -Federal law requiring written disclosure of the terms of a mortgage by a lender to a prospective borrower within three business days of application. A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.

Two-To-Four Property- A property that consists of a structure that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed.

Two-Step-Mortgage- An adjustable-rate mortgage (ARM) that has one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.

U

Underwriting - The process of verifying data and evaluating a loan for approval.

Usury -Interest charged in excess of the legal rate established by law.

V

VA- Department of Veteran Affairs An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

VA Loan -Home loan available to veterans with little or no down payment and guaranteed by the U.S. Veteran's Administration.

Variable Rate - Interest rate that changes periodically in relation to an index.

Variable Rate Mortgage -See Adjustable Rate Mortgage.

Verification Of Deposit (VOD) - Document signed by the borrower's bank or other financial institution verifying the borrower's account balance and history.

Verification Of Employment (VOE) - Document signed by the borrower's employer verifying the borrower's position and salary.

Vested- Having the right to use a portion of a fund such as an individual retirement fund. For example, individuals who are 100 percent vested can withdraw all of the funds that are set aside for them in a retirement fund. However, taxes may be due on any funds that are actually withdrawn.

W

Waiver - Voluntary relinquishment or surrender of some right or privilege.

Walk-Through - A final inspection of a home to check for problems that may need to be corrected before closing.

What-If-analysis-An affordability analysis that is based on a what-if scenario. A what-if analysis is useful if you do not have complete data or if you want to explore the effect of various changes to your income, liabilities, or available funds or to the qualifying ratios or down payment expenses that are used in the analysis.

What-if-Scenario-A change in the amounts that is used as the basis of an affordability analysis. A what-if scenario can include changes to monthly income, debts, or down payment funds or to the qualifying ratios or down payment expenses that are used in the analysis. You can use a what-if scenario to explore different ways to improve your ability to afford a house.

Wrap-Around Mortgage -Loan arrangement in which an existing loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. A mortgage that includes the remaining balance on an existing first mortgage plus an additional amount requested by the mortgagor. Full payments on both mortgages are made to the wraparound mortgagee, who then forwards the payments on the first mortgage to the first mortgagee.

XYZ

Zoning Ordinances (or Zoning Regulations) - Local law establishing building codes and usage regulations for properties in a specified area.